More U.S. Citizens Living Overseas Renounce Citizenship

Posted on April 28, 2023

More U.S. Citizens Living Overseas Renounce Citizenship

The strict tax compliance rules of Foreign Account Tax Compliance Act (FATCA) have lead more U.S. citizens living abroad to renounce their U.S. citizenship. After the IRS began to aggressively pursue tax evaders, many U.S. citizens living abroad found their tax troubles increasing. Under FATCA, the IRS demands the disclosure of financial information not only from individual taxpayers, but also from the financial institutions with which they do business. Non-compliance attracts heavy penalty. The Register Guard elaborates on how it is impacting Americans living overseas:

“The government’s pursuit of tax evaders among Americans living abroad is indeed driving the jump in abandoned citizenship, experts say. But renouncers — whose ranks have swelled more than five-fold from a decade ago — often contradict the stereotype of the financial scoundrel. Many are from very ordinary economic circumstances.

“Some call themselves ‘accidental Americans,’ who recall little of life in the U.S., but long ago happened to be born in it. Others say they renounced because of politics, family or personal identity. Some say signing away citizenship was a huge relief. Others recall being sickened by the decision.

“At the U.S. consulate in Geneva, ‘I talked to a man who explained to me that I could never, ever get my nationality back,’ says Donna-Lane Nelson, whose Boston accent lingers though she’s lived in Switzerland 24 years. ‘It felt like a divorce. It felt like a death. I took the second oath and I left the consulate and I threw up.’

“When Americans do hear about compatriots rejecting citizenship, it’s more often people keeping their U.S. citizenship and dropping that of another country.

“Last year, Texas Sen. Ted Cruz acknowledged the Canadian citizenship he was born to, but said he would renounce it. In 2012, Rep. Michele Bachmann, R-Minnesota, saying she was “’100 percent committed to our United States Constitution,’ announced she was giving up Swiss citizenship gained through marriage.”

The decision to give up U.S. citizenship is not purely due to the tax reporting requirements although they might be the trigger that has got many Americans living overseas to question their identity, preferences and needs. The Register Guard shares different journeys of how many Americans living abroad reached the decision to give up their U.S. citizenship:

“Decisions to renounce ‘are driven by a whole range of emotional considerations. … You’ve got anger, you’ve got fear, you’ve got a strong sense of indignation,’ said John Richardson, a Toronto lawyer who advises people on expatriation. ‘For many of these people, this is not a tax issue at all.’

“Even some who acknowledge tax worries say decisions to renounce are far more complicated than a simple desire to avoid paying.

“Peter Dunn, born in Chicago and raised in Alaska, moved to Canada to pursue a graduate degree in theology. He met his wife, Catherine, and they made Toronto home when her work as one of the owners of an aviation maintenance firm made her the breadwinner.

“Dunn remained an American. But he was alarmed by a change in U.S. law requiring those with more than $2 million in assets to pay an exit tax if they gave up citizenship. He didn’t have $2 million. But his wife was doing well enough that he imagined one day they could get there. The idea of the U.S. government taxing his Canadian wife’s money didn’t seem right.

“‘When I learned about that, I decided that to protect my wife, I better expatriate,’ he says.”